Financing Terror: A Strife 4-part series

Al Qaeda, ISIS, and the Taliban are household names these days. Yet, in the climate of the ‘War on Terror’, how do organisations like these survive and even thrive? It takes more than just strong leadership and organizational skills to uphold the proper functioning of terrorist groups – it takes money. Terrorism is the culmination of costly planning. It includes the dissemination of ideology, maintenance of logistics, recruitment and training of operatives, and perpetration of the terrorist act itself. Financial activity related to terrorism accounts for an estimated 5% of the annual global output, or about $1.5 trillion USD. 1

The events of September 11th 2001 thrust the issue of terrorist funding into the limelight of the global arena. Globalisation of communication, the internet, and banking systems have enabled terrorist organizations to expand their activities and financial mechanisms needed to finance these activities. While state-sponsoring was previously a primary source of funding for terrorist activity, international cooperation through UN resolutions and economic sanctions has dissuaded state actors from sponsoring terrorist activities, thereby leading to the substantial decrease of this method of funding. Terrorist organizations have, as a result, increasingly turned to diverse and alternative sources of revenue, such as criminal activities – including drug trafficking, credit card fraud, and kidnapping for ransom – as well as private sources of funding through charities and individuals.

The methods and resources used to fund terrorism vary from region to region, and from group to group. Limiting the financial resources available to terrorist organisations is a crucial step in the fight against terrorism, and both national governments and international bodies have taken steps to address this.

The attacks of September 11th had highlighted the shortcomings of UNSC Resolution 1267, which called upon UN member states to identify, seize, and freeze financial resources of the Taliban, Al Qaeda and their affiliates, but which lacked any means of enforcing its provisions. In response to these shortcomings, the UN adopted UNSC Resolution 1373 in 2001, which required all UN member states to criminalize direct or indirect support for terrorism, including terrorism funding.

As one of the leaders in the ‘War on Terror’, the US government issued the USA Patriot Act which created strict legal measures to counter terrorist financing. Also, the Financial Task Force (FATF), an inter-governmental body created in 1989 by the G-7 in order to combat money laundering and terrorist financing, issued a revised series of recommendations on how to combat money laundering and terrorist financing. The World Bank and the IMF have since developed assistance programs for countries to ensure compliance with the FATF’s recommendations.

Current international efforts to combat this phenomenon have been largely focused on commitments by UN member states. This is problematic, as it does not provide a framework or incentive for non-UN member states or entities to effectively combat terrorist financing. Furthermore, current international legislation on terrorist financing is very general and does not take into consideration the unique situation of each state. Whereas the United States may easily implement some of the legislation on a national level, it is very difficult for a state such as Syria, which is currently in the midst of a civil war and is a hotbed of terrorist activity and chaos, to properly implement international legislation on terrorist financing. Ironically, it is precisely states such as Syria, Afghanistan, and Iraq which may benefit the most from a crackdown on terrorist financing.

On a strategic level, despite a growing international focus on combating terrorist funding, increasingly sophisticated methods of financing terrorism have meant terrorists are often able to stay one step ahead of authorities. The illegal activities used by terrorist groups to finance their activities often do not leave a cash trail, making them difficult to track. Thus, terrorist financing continues to remain a major stumbling block to curtailing terrorist activity.

Over the next few weeks Strife will feature a four-part series on terrorist financing. Each author will examine a different method of terrorist financing, using modern and varied case studies, offering a new look at who and what is funding today’s terror activities. Arne Holverscheid will discuss the role of private Kuwaiti donors in financing rebel groups in Syria affiliated with terror organisations and blurring the lines between good and bad, friend and foe. Claire Mennessier will examine the involvement of Pakistan in financing terror groups, and the motivations and challenges presented by this involvement. Samuel Smith will address the frightening trend of kidnapping for ransom as a source of finance for terror groups through a case study of the Abu Sayyaf Group in the Philippines and Southeast Asia. Finally, Drew Alyeshmerni will shed light upon the use of charities as a cover for terrorist financing and the implication that defining certain organisations as terror groups may have upon the eradication of this source of financing.

The financing of terrorism continues to be a global challenge and an increasingly important aspect of counterterrorism efforts. We hope this series will pique your interest in the subject and lead to a more detailed understanding of the sophisticated and varied ways of financing terror.

Maya Ehrmann is a Guest Editor for Strife. She is currently reading for an MA in Intelligence and International Security at King’s College London and holds a BA in Government and Diplomacy from the Interdisciplinary Centre, Israel. Her primary areas of research interest include counterterrorism, international security, and Middle Eastern affairs.References:1 Jennifer L. Hesterman, The Terrorist-Criminal Nexus: An Alliance of International Drug Cartels, Organized Crime, and Terror Groups, (Boca Raton: CRC Press, 2013), p. 167.